Why the Client Belongs to the Contractor and not the Agency

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Big Rebuttal of Client Article

A contractor sent a rebuttal of our recent article from an agent, ‘Why the “client” belongs to the agency, not the contractor’, where the agent said that he was sick of contractors talking about their ‘client‘ whereas he felt that the agency owned the client and the contractor was a ‘disguised employee‘.

Here are ten reasons he has put for the clients being those of the contractor and not the agency.

1. The contractor has no contract with the end client – only the agency has. The contractor’s contract is with the agency for which he or she is a supplier.

Rebuttal. First, theory: trivially, the contractor has formal and informal contracts with whomsoever he or she contracts. Formally, this may include zero, one, or more of the end client(s) and agency. Secondly, practice: We normally maintain contracts with both. This is not always explicit, but contracts need not be explicit.

In any case we often license software explicitly and directly to end clients completely independently of the agency. Trust me, there is no conceivable breach of the other contract (My LLM dissertation is on a relevant aspect of copyright law) unless the contractor is stupid enough to surrender all historical IP, which of course is never required.

2. The contract stipulates that the contractor cannot look for new work from his ‘client’ while he or she is working there. The main reason for that is that it is the agency’s client

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Rebuttal: Theory: neither statute nor common law requires any such contractual stipulation. Practice: I have never seen any such stipulation in any contract. Further, clearly any agency fool enough to try to restrict marketing in this way is doing itself out of business.

Finally, any agency fool enough to take action in tort for marketing its wares at no charge would be a laughing stock in court. And if by some mischance it did win, damages for loss of claimant‘s business or accounting of defendant‘s profits would be precisely nil. I discuss’Poaching’ in the next point.

3. The contract states that the contractor cannot work for the client for a set period, e.g. 9 months after the contract has ended. If it were the contractor’s client, then he wouldn’t have to sign this clause. This is to prevent him poaching someone else’s (i.e. the agency’s) client.

Rebuttal: Theory: neither statute nor common law requires any such contractual stipulation. Therefore there is no requirement to sign any such clause. Practice: As Lord Denning MR said (from imperfect memory, in Massey v Crown Life Assurance), the parties to a contract may sit down and renegotiate that contract at any time. As I personally have done more than once.

Even where you sign it, you can persuade the agent to drop it. Business is business, and these things can be win-win. And in business there is no such thing as poaching – just contractual obligations.

4. The client doesn’t negotiate rates with the contractor before he or she starts, but does it with the agency, their supplier.

Rebuttal: Theory: neither statute nor common law restricts contractors in this way. Practice: it depends how open the parties are, the enforceability or otherwise of confidentiality ‘agreements’ notwithstanding. It‘s often a good idea to not commit to particular fees until the client sees benefit.

5. The client doesn’t normally discuss increases at renewal time with the contractor but with the agent with whom they have the contract.

Rebuttal: What is ‘normal’? What the agent would like to see, perchance? In practice, often rubbish. We may note that often a form of renewal is negotiated and executed without the agent‘s knowledge, the agent being informed after the fact.

Particularly where the agent doesn‘t bother to contact any other party at renewal time, the other two parties often find themselves having to get together to come to agreement on continuation.

6. The client doesn’t normally terminate the contractor directly, but through the agency. They can‘t, as they don’t have a contract with the contractor. They MAY inform the contractor, but they always tell the agency.

Rebuttal: What is ‘normal’? This begs the question from start to finish. In practice, sometimes the agent is the last to discover that the contractor has left.

7. The contractor never takes the end client out to lunch and pays, and agents almost always do, which is a fair pointer to whose client it is.

Rebuttal: ROFL! For a start, this is utterly false. My last major client was taken out to lunch often by myself, and never by the agent. Besides, I often have been taken out to lunch by agents. So is this ‘a fair pointer to whose client’ the contractor is?

8. If the client is happy with the contractor and wants ‘another one’, he goes to the agency and not the contractor.

Rebuttal: Over the years I have recruited about 20 contractors for various end clients at their request, in ‘friendly competition’ with the HR department, because HR has access only to agency contractors, whereas I have access to people who can get the job done (and no, I‘ve not acted as an agency for over ten years, rather just a free matchmaker).

Besides, ‘another one’ begs the question about what the contractor is for: contract of service or contract for services?

9. If the client wants to incentivise the contractor or pay him or her a bonus, he must go through the agency, probably with the agency taking a cut.

Rebuttal: Of course it‘s possible to go through the agency, though I‘ve never seen this (then again I‘ve never seen a bonus – and success fees are contractual). On the contrary, there are many ways of incentivising a contractor. All the ways I‘ve seen have been directly via the client.

For instance, even the notoriously intransigent BT incentivised me by allowing me to work from home, and with my own productivity software.

10. There is seldom a supplier / customer relationship between the client and the contractor, the way there is between the client and the agent. The contractor often refers to the client as ‘the boss’ which the agent never does. The client looks upon the contractor as a temporary employee, which is what he, or she really is.

Rebuttal: What does ‘seldom’ mean? And while exceptionally deranged clients sometimes look upon a contractor as a temporary employee, they would be foolish to use them that way or force them to act that way, If that is what ‘he or she really is’, that would be to create a direct contractual relationship of temporary employment between the client and the contractor, cutting the agency out and by definition creating employment rights irrespective of the presence of the agency and limited company.

At best, if the contractor really is a temporary employee, the agency would be paying PAYE and NI on behalf of that contractor.

What About IBM?

Is IBM a temporary employee? Oracle? Sybase?

Of course they are, if you accept the agent‘s point 10. I cite in support of that proposition a contract of a few years ago, where at the end-client‘s insistence its contract with my company derived most of its clauses from its parallel contracts with its other suppliers, named above. So gosh, IBM is just another temporary employee. You learn something new every day.

Finally, and just to be wicked, it‘s worth noting here that many clauses in services contracts – occasionally the majority – either are statutorily unenforceable or may be struck out by the Court on the basis that they contradict other clauses in the same contract. This should surprise nobody – many clauses exist for propaganda purposes, their legal force or otherwise being irrelevant.

Disclaimer: The above is only a brief commentary and may be incorrect. The author does not possess a licence to practise law in any of the UK jurisdictions and none of the above statements may be construed as legal advice.

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